PCL is a leading European consumer electronics, lifestyle and healthcare company that has been operating in the Chinese market since 1995. While its consumer electronics business has grown quickly in China, it has discovered that the costs of returned goods in its TV division equal 5% of its sales. Even more worrying is that 37% of the products returned are of good quality and have been returned without good reason. PCL has set up taskforces to study and remedy the situation and has uncovered a more serious problem within the organisation: control measures designed to handle returns have simply not been executed by its staff and third-party after-sales service centres. What can PCL do to ensure enforcement of company policies in the future?

Functional Area :

Accounting & Control

Learning Objective:

To explore the importance of internal controls in managing the distribution of electronic products throughout China; to explore the importance of monitoring internal control mechanisms; and to explore the people factor in a control system, including customer education, salesperson capability, goal congruence and incentives.